Vodafone likely to buy YOU Broadband for Rs 400 crore

The companies have been in talks for the last three months, and documents are now being drawn up to finalise the acquisition, said a third person.Deepali Gupta&Baiju Kalesh | ET Bureau | Updated: January 16, 2016, 09:00 IST

MUMBAI: Vodafone India will soon buy You Broadband, a cabled Internet company for around Rs 400 crore, said two people familiar with talks. The companies have been in talks for the last three months, and documents are now being drawn up to finalize the acquisition, said a third person.

The acquisition is relevant as it will increase Vodafone's competitiveness in high data consuming cities against Mukesh Ambani's Reliance Jio Infocomm, which is expected to launch commercial operations later this year. Vodafone will need to compete on Internet speed over its 4G network and pricing.

"All telecom operators need more robust optic fibre, back haul. They also need to gear to direct access to customers through fibre to home or building," said Kunal Bajaj, telecom consultant and CEO Bombay Gas. Expense and time delays in getting right of way to lay fresh cables in the ground, make any operational asset advantageous, he said.

Vodafone and You Broadband declined to comment.

Jio officials have often emphasized on quality of their network being backed with cables to shake incumbents' customers. A cabled back haul for wireless networks can significantly enhance the capacity of a tower or signal emitting point compared to doing it entirely over airwaves.

TRG Capital-owned You Broadband has around 3,000 kilometers of optic fibre and 6,000 kilometers of last mile cables to homes across 12 cities. The most prominent of it being in Mumbai, a key data market for Vodafone, where the battle with Jio will be intense.

However, not all industry experts agree with Vodafone's bid to buy You. "If they (Vodafone) are treating this as a very expensive experiment to learn the ropes of cabled broadband its one thing, but as a business to bank on quite another," said a person familiar. You Broadband's growth in the last two years has been stagnant and its integration will be difficult because that network is not designed in tandem with Vodafone's, he said.

Vodafone globally is increasing its optic fibre and landline businesses, which would be critical for the growing data demands per house.